Gas rate boost granted to BGE average bill to rise by $3.38

November 22, 1995|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

The state's Public Service Commission has granted Baltimore Gas and Electric Co. a 5.1 percent natural gas rate increase, which will generate $16.9 million in additional revenue for the utility annually.

The increase will raise the average residential customer's gas bill by $3.38 per month. BGE supplies natural gas to 540,000 Central Maryland customers.

BGE intends to appeal parts of the decision, however. The commission ruled that profits from BGE's Home Products & Services Inc. subsidiary should benefit ratepayers, not shareholders as the utility had sought. BGE also disagreed with the PSC's calculation of the amount of profit the subsidiary generates annually.

If granted, the profit from the Home Products subsidiary would have raised BGE's gas revenue increase to $21 million.

"Our position is that it's a competitive business and should not be co-mingled with the utility operations, so therefore any profit should be given to shareholders," said Kevin J. Miller, BGE's director of financial planning. "By contrast, if Home Products sustained a loss, customers should not be required to subsidize that, either."

The PSC also chopped points off the percentages BGE had sought for rate of return and return on equity allowed from gas operations. BGE filed for a rate of return of 9.54 percent from its current 9.4 percent, but the PSC elected to lower that figure to 9.04 percent.

The PSC also lowered the return on equity (ROE) from 11.75 percent to 11.4 percent. The company asked for a ROE increase to 12.5 percent.

The decision will increase BGE's earnings per share by only a few cents, said Alex Hart, a Ferris, Baker Watts Inc. utility industry analyst.

In making the decision, the PSC overruled a commission hearing examiner who last month decided that BGE was entitled to a $19.4 million gas revenue increase. The PSC acted on the case after BGE appealed the examiner's Oct. 3 decision.

In its original April application, BGE had sought a 7.6 percent jump, citing capital improvements since 1992.

That increase would have raised gas revenue to the utility by $30 million a year.

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